Indian pharma market records a blip, but stays the course for fresh rally

The IPM's moderation in June is largely seen as a one-off event as long-term outlook remains robust.

After recording a stellar growth run in recent months, the Indian Pharma Market (IPM) witnessed a moderation in June, primarily dragged by a delayed monsoon which adversely impacted seasonal demand for acute products, and an unfavourable base.

The IPM recorded a year-on-year growth of 4.5 percent during June, significantly lower than the average increase of around 16 percent posted over the February-May period.

Global research and broking firm Nomura says the strong growth in the months preceding June were driven primarily by the high demand for acute products, particularly anti-infectives, and gastro, pain and respiratory medications, key triggers that were missing in June.

Brokerage firm Motilal Oswal Financial Services also points to other factors, such as the inclusion of some products under the National List of Essential Medicines (NLEM) and a decline in prices of certain products under NLEM, as contributing to the growth slowdown.

However, analysts do not expect the moderation in June to hinder the overall strong outlook for the IPM. Analysts at JM Financial believe the domestic pharma market will likely sustain early double digit growth in FY24 on expectations that price hikes would be reflective beyond the first quarter.

Kotak Institutional Equities also expects companies in its coverage to report 10-15 percent domestic sales CAGR (Compounded Annual Growth Rate) across FY23-26, largely driven by pricing, new launches and inorganic pharma forays.

KIE also highlights the importance of domestic sales as a critical driver in supporting overall growth for formulations-based pharma companies, despite an improved generics pricing scenario in the US.

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Meanwhile, cardiac, anti-diabetes, neurological and dermatological therapies outperformed the overall growth in the Indian Pharma Market in June. Continuing with the trend seen in recent months, growth in the chronic segment outpaced the growth seen in acute therapies in June as well. The acute segment grew 9.7 percent in June on a MAT (market share by sales value for moving annual total, meaning the last 12 months up to the last published month) basis while the chronic segment expanded 12.1 percent.

On the basis of MAT in June 2023, the acute segment made up 62.3 percent of the overall IPM while chronic therapies accounted for a 38 percent share.

Coming to the various companies competing within the IPM, players like JB Chemicals (up 11.2 percent year-on-year), and Ajanta Pharma (up 10.4 percent YoY) sharply outperformed the IPM.

"Growth for JB Chemicals was led by a strong growth in cardiac therapy and its gynaecology segment while that for Ajanta Pharma was aided by its ophthalmology and pain therapies along with its dermatology business," the MOFSL report points out.

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JB Chemicals also recorded industry-leading growth in terms of volumes, which rose 10.7 percent on year on a MAT basis, while Eris Lifesciences led the race for highest growth in new launches at 10 percent YoY.

Among the laggards was P&G Health, which saw a decline of 4.7 percent on year in June due to deterioration across therapies, MOFSL notes. Moreover, Indian pharma companies dominated the industry with a market share of 83 percent in the IPM in June while the rest was covered by multi-national drugmakers.

Indian pharma companies grew five percent on year, faring better than the two percent growth registered by MNC pharma players in the same month.

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